As home prices rose, the equity in your home increased and likely represented a larger portion of your net worth. This increase in net worth had an impact beyond simply giving you “bragging rights” when talking with friends and neighbors. It also made it easier for you to access the equity in your home for a variety of benefits.
Equity is the current value of your home minus what you owe on the loan.
Equity is a powerful tool for homeowners. It can be used to finance home improvements and repairs, pay for college tuition, or even be tapped into during times of financial hardship. The equity in your home can also be used as collateral for a loan or line of credit.
For most people, the primary way to increase their equity is by making regular mortgage payments over time. As you make payments on your mortgage principal, you are essentially paying yourself back and increasing your ownership stake in the home—which raises its value. Over the past few years, due to the imbalance between supply and demand in many housing markets across the country, this process has been significantly accelerated thanks to increased appreciation rates.
Now that appreciation rates are flattening out, you may find yourself in a position to take advantage of the equity you have built up. While it can seem tempting to tap into your equity, remember that doing so can be risky if your financial situation changes for the worse. If you are unable to make payments on any home loans or lines of credit secured by your equity, then you could lose your home or end up in a difficult financial situation. So it is important to carefully consider whether tapping into your equity is the right decision for your current and future financial circumstances.
Ultimately, if used wisely and with caution, having access to the equity in your home can provide flexibility in times of hardship and opportunity during times of stability—allowing you to improve not only your current financial wellbeing but also your future.
It is a good idea to speak with a qualified financial planner or mortgage professional to help you make the best decision when it comes to leveraging the equity in your home. They can provide valuable advice and insights into how tapping into your equity could impact your situation, both now and down the road. Be sure to do as much research as possible before making any decisions so that you are fully informed every step of the way.
With careful consideration of all available options, leveraging the equity in your home can be an effective way to free up funds for short-term needs, long-term investments, or anything else you need it for—ensuring that you stay on track financially and keep your future secure.
Why This Is So Important Right Now
Think of the equity in your home as a “savings account” you can access at any time. Unlike other savings accounts, however, it can be accessed without having to pay taxes or fees. And when it comes to leveraging your equity for another real estate purchase, there are several options available that allow you to access your equity in a way that works for you.
If you don’t want to sell your current home, but need the cash from it to afford the down payment on a new home, you could look into getting a Home Equity Loan or Line of Credit (HELOC). This loan will allow you to access the funds tied up in your home’s equity and use them for your down payment.
Alternatively, if you’re looking to purchase a new home but need help covering the closing costs, a Cash-Out Refinance may be an option. This type of refinance pays out the equity in your current home as cash, allowing you to use it towards the closing costs of your next house.
No matter what stage you’re at in the homebuying process, it’s important to consider how tapping into your equity can help make it happen. With a clear understanding of how much equity you have and how to access it, you can move forward confidently towards your goal of a new home.
If you’re ready to take the next step, consult with an experienced lender who can give you guidance about how much equity you have and what options are available for accessing it. With the right knowledge at your fingertips, creating a plan to move forward in the homebuying process is more achievable than ever before.
If you’re planning to make a move, the equity you’ve gained over time can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, let’s connect.
Information sourced from Keeping Current Matters